Weekly Market Wrap 19-October to 23-October2020

Marius Paun | London, UK | Senior dealer | Friday 23rd October 2020

Back And Forth On Stimulus Talks But Nothing Agreed Yet

The US stock markets started the week on the back foot after House Speaker Nancy Pelosi appeared to give an ultimatum. She wanted to reach an agreement on the stimulus bill within 48 hours if any deal would have any chance of being reached before the November 3rd election day. Later on, she and Treasury Secretary Mnuchin said they ‘continued to narrow their differences’ and that something can be done by the end of the week. So the usual back and forth but nothing concrete to report as we go into the weekend.

Fed’s Beige Book was released this week showing the economic activity improved at the slight to modest pace. Manufacturing increased at a moderate pace and businesses faced increased costs due to Covid-19. Consumer prices increased modestly with construction and retail companies passing along higher costs to their clients.

We also saw the final Presidential debate between Trump and Biden on Thursday evening. A key highlight was that both were more restrained this time allowing each other to speak. There were still attacks on both sides but done in a calmer manner. Trumps seemed to have done better on tax issues, whereas Biden came out better on issues such as global warming, race and immigration policies.

China has made public its third-quarter GDP showing a 2.7% increased versus expectations for +3.3% rise. The strong number for imports seemed to have convinced analysts that economic strength could soon follow.

Back in the UK, Finance Minister Rishi Sunak announced additional support for business after receiving plenty of complaints for not doing enough.

  • -Grants will increase to max £3750 from £1875 previously
  • -Doubled grants for self-employed
  • -Employees are only required to work 20% of hours; previously it was 33%
  • -Cash grants will be up to £2100 per month

On the Brexit front, Prime Minister Boris Johnson said last Friday there was no point to continue talks. It now appears that Frost and Barnier (respective representatives) agreed to intensify discussions in a final attempt to find common ground.

In addition, we learned that the EU will return to London for further talks. UK government officials admitted that significant gaps remain and it’s quite possible that ‘UK will end the transition period on Australia terms (similar to trading on UN terms).

On coronavirus, Boris Johnson ruled out a circuit breaker at the national level, as the leader of the opposition had requested, saying it would mean shutting down schools and businesses causing massive economic damage. He added the current policy in place – 3 tiers, would allow the struggling regions to bounce back.

Gold rallied initially to reach $1931 but by the end of the week, it appeared to have been a false breakout. The precious metal retraced, even dropping below the $1900 mark on Friday afternoon on fading stimulus hopes.

There was a meeting at the OPEC’s Joint Ministerial Committee level this week but there was no word on delaying further output cuts. US Crude oil slumped on growing Covid concerns dropping from a high of $41.2 per barrel to a low of $39.76. The US Department of Energy released its oil inventory on Wednesday showing a drop of 1 million barrels versus expectations for a build of 0.5 million barrels.